MBA Mortgage Applications 5-15-13

MBA Mortgage Applications 5-15-13

TRADEX GLOBAL INTERNAL COMMENTARY

US Mortgage Applications declined 7.3% last week. 

The MBA reported a 7.3% decline for the week ended May 10th from the previous week.  The survey covers more than three-quarters of all residential mortgage applications.  The refinance index (what we focus on) was down 8%, while the new purchasing index was down 4%.  The percent share of applications to refinance an existing mortgage was flat at 76% from the week earlier.  The average rate on a 30-year conforming mortgage was higher at 3.67%, from the previous week of 3.59%.  In the last few weeks we have seen elevated CPR’s (prepayments) and many holders of IO securities threw in the towel.  This selling has given the “smart and seasoned” veterans a rare chance to buy IO’s at levels not seen since 2008.  We stand by our prediction that the level of re-fi’s  will stay elevated in the short term, but that the securities already have that baked into the price.  We are not going to try to catch the falling knife, but in time we will increase our allocation to IO’s in our Liquid Real Estate Portfolio.  As a reminder, in 2008 we increased IO’s and made approximately 190% in the aftermath.  Of course we will monitor Washington to see if anything is going to change in the HARP programs, but still believe that the homeowners that could have refinanced have already done so and that prepayment rates are probably cresting, both of which are a major positives for us.  Keep nimble – Michael Beattie

EXTERNAL RESEARCH COMMENTARY

Applications for home mortgages fell last week for the first time in more than a month as interest rates jumped, sapping demand for refinancing, an industry group said on Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 7.3 percent in the week ended May 10. The index of refinancing applications tumbled 8.1 percent, while the gauge of loan requests for home purchases, a leading indicator of home sales, lost 4.1 percent. The refinance share of total mortgage activity held steady at 76 percent of applications. Fixed 30-year mortgage rates rose to the highest level since the beginning of April, up 8 basis points to average 3.67 percent. The survey covers over 75 percent of U.S. retail residential mortgage applications, according to MBA.